Coca-Cola has struggled with declining sales and profits this year. Its core sparkling beverages business marked its first period of sales declines in 15 years in the first quarter and it looks set to miss its profit forecasts for this year and next.
Increasingly health conscious consumers are turning away from drinks like Coca-Cola, while CEO Muhtar Kent admitted there is still “work to do” on Diet Coke, which has seen mid-single digit sales declines.
It’s marketing campaign around Share A Coke this year also hasn’t created as much fizz as last year, with sales for the masterbrand and Diet Coke falling and rival Pepsi outpacing it in the UK.
It’s sponsorship strategy also hasn’t hit the high notes. While the company credited “strong marketing activation” around the World Cup for an improved performance in Europe, it has been caught up in corruption allegations surrounding Fifa and the bids for the 2018 and 2022 World Cups. It was similarly impacted by negative commentary around the Sochi Olympics, when sponsors were criticised for not speaking out about host Russia’s anti-gay policies.
Coca-Cola is hoping to turn around its performance with a number of initiatives. It has launched Coke Life and early signs are that sales are doing well. It has also embraced the traffic light labelling scheme, having previously shunned the initiative, and pledged a £20m investment into community-based sports projects in an attempt to prove it is taking health concerns seriously.
McDonald’s has had a challenging year with sales declining as consumers become increasingly health conscious and competition in the fast food space heats up. Revenues in its most recent quarter were down 3.3%, while profit fell 30% and it marked 12 consecutive months of declining sales in the US.
It has launched a number of initiatives to try and address its problems. At the start of the year it created its first retail marketing director role to boost in-store experience and has introduced free fruit into Happy Meals as part of plans to target kids with healthier alternatives.
It’s marketing has taken more of an emotional approach, rather than focusing on product. A campaign to celebrate its 40 years in the UK was aimed at reminding people about the role it has played in memorable moments in people’s lives while it also promoted the positive impact the brand has had on customers, employees and communities in the UK.
Technology has also been a focus, with plans for personalised experiences and an online music, loyalty and ordering service. Local is also getting a push with plans for menus targeted at local communities.
However the problem is that McDonald’s, along with Coke, has focused too heavily on categories such as burgers and chips that are falling out of fashion as consumer behaviour changes. Traversing that will require a lot more work.
There is no doubt this has been a good year for Facebook numbers wise. Revenues are on the up, it is benefitting from the shift to mobile and user numbers continue to rise. However, reputationally this has been a difficult year.
It faced huge backlash over its experiment with users’ moods, in particular for not telling them it was doing it. Then it was hit by the revelation that Lee Rigby’s killers held conversations on the social network discussing their intention to murder a British solder. More recently anger over its tax situation have resurfaced, with campaigners calling its tax bill of £1.8m on ad sales of £2.37bn “morally unacceptable”.
Facebook will argue that while revenues and user numbers continue to rise it has little to worry about, but these sorts of damaging revelations can hit a brand’s reputation over the long term. It sits below the top 15 in a list of online brands on YouGov Brand Index across a range of measures including Impression, Buzz and Recommend. The Facebook business may be doing well but the brand requires some love.
The big four supermarkets
It would be easy to pick out Tesco as the ultimate candidate for bad year. Four profits warnings in five months, an accounting scandal, a new CEO parachuted in, the list of problems gets longer and longer with each passing month. But Tesco’s problems are symptomatic (ignoring its own issues) of challenges in the wider market.
The rise of the discounters, the shift to online and the growing importance of convenience stores have all combined to make big out of store supermarkets less appealing to customers. They still account for the majority of grocery sales, but Sainsbury’s recently admitted that almost a quarter of its big supermarkets are now underperforming.
Like-for-likes sales at Sainsbury’s, Tesco, Asda and Morrisons are all falling. Meanwhile the discounters are posting double-digit sales growth, according to Kantar Worldpanel.
All four of the big grocers have tried to pitch this as “structural” changes that they couldn’t foresee. However the reality is they have created this “perfect storm” by investing in their own online and convenience channels, promoting own-brand products that have weeded people off the big brands and taking their eye off pricing.
The turnarounds could take years. The reality is likely to be a more competitive grocery market with lower market share for the big players.
A number of brands have spent this year trying to premiumise their offerings in a bid to boost brand equity, which has taken a tumble in light of the continuing strains on people’s finances. The grocery market is in decline for the first time in 20 years, according to Kantar Worldpanel, as food prices deflate.
That has led to a price war between the big four as they look to stave off the threat of the discounters and appeal to cash-strapped shoppers.
The high street has also been hit by discounting, as savvy consumers play a game of cat and mouse with retailers. Given the scale of Black Friday offers that is a game the consumers seem to be winning.
Brands including Stella Artois, Unilever, Procter & Gamble and Heineken are taking a stand. The FMCG giants are focusing on product innovation and the premium end of the market, pushing their value credentials by highlighting quality and price.